0 Structural Recombination and Innovation : Unlocking Internal Knowledge Synergy through Structural Change

This paper examines how structural recombination of business units within a firm impacts subsequent firm innovation. We argue that structural recombination is a means for firms to unlock the potential for internal knowledge recombination, redrawing the firm’s internal boundaries to bring together complementary knowledge resources. Structural recombination may thus be beneficial to subsequent firm innovation, especially where there are substantial untapped synergies between the firm’s knowledge resources. Specifically, we argue that structural recombination will have a positive effect on firm innovation where there is unexploited relatedness between the firm’s knowledge resources, and where the firm has high quality, general purpose knowledge. Results from a 20-year panel of 71 firms operating in the U.S. medical sector confirm these arguments, with structural recombination having a positive effect on innovation for firms with unexploited knowledge relatedness and those with high quality knowledge resources. The study thus highlights the role of structural recombination in realizing untapped knowledge synergies within the firm, and provides a contingent view of the effects of structural recombination on firm innovation.